Operational and Financial Decisions Within Proportional Investment Cooperatives

Xiaoyan Qian () and Tava Lennon Olsen ()
Additional contact information
Xiaoyan Qian: School of Management Science and Engineering, Dongbei University of Finance and Economics, DaLian 116025, China
Tava Lennon Olsen: The University of Auckland Business School, Auckland 1141, New Zealand

Manufacturing & Service Operations Management, 2020, vol. 22, issue 3, 545-561

Abstract: Problem definition: We explore the coordination of operational and financial decisions of proportional investment agricultural marketing cooperatives, where members’ (farmers’) equity is required to be in proportion to their patronage (i.e., produce supplied). Academic/practical relevance: In a cooperative (co-op), operational and financial decisions are inseparable because the co-op’s investment capital is linked to its economic transactions with members. We include unique features of co-ops into an analytical model and derive some key results that are different from those for investor-owned corporations. Methodology: In the presence of yield and market uncertainty, we model this situation using a Markov decision process wherein the decisions of processing quantity interact with the financial decisions of retained earnings and short-term loans. The objective is to maximize the expected present value of the aggregated farmers’ payments over a finite horizon. Results: (1) Characterization of the properties of the value function and the optimal policy; (2) explicit expressions for the deterministic yield dynamic program, wherein a myopic policy is optimal; and (3) identification of financial risks associated with uncertain market and yield. Managerial implications: The results provide insight into a co-op’s decision making, cash position, and risk management.

Keywords: cooperative; proportional investment; finance and operations; coordination; risk (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://doi.org/10.1287/msom.2018.0762 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormsom:v:22:y:2020:i:3:p:545-561

Access Statistics for this article

More articles in Manufacturing & Service Operations Management from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().